Swancor (TSE: 3708) Company Profile 2017/06completed in April 2016. Formosa Plastic (TSE: 1301) owns 18% of equity. • Products are pre-peg, thermal plastic plate, and extrusion spar

Swancor (TSE: 3708)

Company Profile2017/06

Swancor Holding

Fine chemicalCarbon fiber composite

Offshore Wind Power

Business Units

Copyright © Swancor All Rights Reserved22

Anti-corrosion material

Wind turbine material

Swancor RenewableFormosa I

(128MW)

Formosa II

(300-500MW)

Formosa III

(1,900MW)

Revenue

RevenueNT$ MN

By product2016,%

6,000

8,000

10,000

12,000


By Area2016,%

-

2,000

4,000

6,000

2013 2014 2015 2016 2017Q1

Anti-corrosion material

Wind turbine blade material

Others

Fine Chemical – Anti-Corrosion Material


Fine Chemical – Anti-Corrosion Material

RevenueNT$ MN

• Major product is vinyl ester.

• Major applications are anti-corrosion tank and pipe for factories, desulfurization tank and pipe, and chimney for power plants.

• Broad customer base. Sales through direct sales or distribution. Produce product by order.

• Major competitors are Ashland (US) and DSM (Holland),

• Market is oligopolistic with stable gross 2,000

2,500

3,000


• Market is oligopolistic with stable gross margin. Volume grows steadily every year.

• In 2016, Swancor sold 32 thousand tons. Main market was China.

• Regarding vinyl ester, Swancor sold 18 thousand tones in China. Total China market was 75 thousand tons. Swancor market shares in China was 24%

• International markets for Swancor are South-East Asia, India and Middle-East.

-

500

1,000

1,500

2013 2014 2015 2016 2017Q1

Wind Turbine Blade Material


Fine Chemical – Wind Turbine Blade Material

RevenueNT$ MN

• Products are epoxy resin and hardener.

• Major customers are China wind turbine blade makers, such as Sinoma (SZE: 002080), Zhongfu Composites and TPI Composites .

• Direct sales. Entry barriers in technical and customer services are high.

• Major competitors are Hexion (US), Olin Epoxy(US), and Huntsman(US).

• Market is oligopolistic with stable gross 6,000

7,000

8,000


• Market is oligopolistic with stable gross margin. Volume is highly relates to wind turbine market.

• In 2016, Swancor sold 23 thousand tons. Main market was China.

• Total quantity of China market was 115 thousand tons and global market was 250 thousand tons. Swancor market shares in China was 20%.

• International markets for Swancor are India, Middle-East, Turkey and Mexico.

-

1,000

2,000

3,000

4,000

5,000

2013 2014 2015 2016 2017Q1

China Wind Power MarketChina Wind Power New Installed Capacity

GW

China Wind Curtailment Rate%

15

20

25

30

35

10%

15%

20%

25%

30%


In 2016, China wind power new installed capacity was 23GW, 49% of global 54.6GW.

According to China government 13-5 plan, annual new installed capacity will be around 18GW-20GW from 2016-2020.

In 2016Q1, wind curtailment rate was as high as 26%. Main reasons are power consumption growth rate was low and inter-China power network was not sufficient.

As China invested RMB 218BN in inter-China power network, wind curtailment rate decreased.

-

5

10

2012 2013 2014 2015 2016 2017Q1

0%

5%

2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1

Carbon Fiber Composite

Global carbon fiber composite demand

Thousand tons

Global carbon fiber composite demandBy application, %, 2016

• Swancor carbon fiber composite factory was 100

120

140


• Swancor carbon fiber composite factory was completed in April 2016. Formosa Plastic (TSE: 1301) owns 18% of equity.

• Products are pre-peg, thermal plastic plate, and extrusion spar.

• Applications are automotive parts and wind turbine blade spar.

• Thermal plastic plate has manufacturing flexibility and cost advantage over traditional pre-peg and is recyclable.

• The demand of carbon fiber spar is increased as wind turbine blades getting longer.

0

20

40

60

80

2016 2017 2018 2019 2020 2021 2022

Source: JEC 2016

Offshore Wind Farms - Formosa I, II and III

• Swancor renewable is developing Formosa I, II and III, three offshore wind farms.

• Formosa I, located northwest of Taiwan, will have 128MW capacity. Phase I 8MW has been installed and is commercial ly operating. Phase II 120MW will be built in 2019. Macquarie capital, DONG energy, and Swancor owns 50%, 35%, and 15% of the

Formosa I, II

Formosa III


equity respectively.

• Formosa II, located in the west and south of Formosa I, will have 300-500MW capacity . We are conducting environmental impact analysis (EIA) and geological prospecting.

• Formosa III, located in the west of Taiwan, will have 1,900MW capacity . We are conducting EIA and geological prospecting. Swancor is partnering with Macquarie for this project.

Offshore Wind Power Developer –Swancor Renewable

Taiwan government offshore wind power target

MW

• Swancor renewable energy, a fully owned subsidiary of Swancor, is a pioneer offshore wind power developer in Taiwan.

• Revenues are management fee and success fee in

Developer

SwancorRenewable

Off -shore wind farm

Formosa IDevelopment

Management fee,Success fee


• Revenues are management fee and success fee in wind farm developing stage and operating and management (O&M) fee when commercial operating.

• Normally, it will take 6-7 years to develop an offshore wind farm. Major milestones are permits, planning, fund raising, construction, and commercial operating.

• Success fees might be generated after milestones be completed Success fees are related to wind farm IRR. Key factors are wind condition, feed-in-tariff (FiT), and CAPEX.

Technical, procurement, safety, project management

Finance, procurement, project management

Formosa I founder

Swancor Ind.Macquarie

CapitalDong Energy

15% 50% 35%

100%

Holding company of Swancor group

Swancor Holding

Offshore Wind Power Business Model


Offshore wind farm developer

Swancor Renewable Formosa Intl. Holding

Perm

it

Fin

ancin

g

Con

struction

O&

M

Developing service

Formosa I

100%

100%

Income Statement


* ROE is annualized.

Balance Sheet and Financial Indexes


Account Receivable and Bad Debt Reserve

2,023 1,825

1,717

1,301

-

500

1,000

1,500

2,000

2,500

2016Q2 2016Q3 2016Q4 2017Q1

Account Receivable


NT$

Mu

llion

66

44

-84

-1

-100

-80

-60

-40

-20

-

20

40

60

80

2016Q2 2016Q3 2016Q4 2017Q1

Bad Debt Reserve

Cash Flow


2015-2017 CAPEX

• 2015-2017 total CAPEX will be NT$ 4,800MN.

Fine Chemical Offshore Wind Power

Cash Cow

Carbon Fiber

Star Star


• The investments in fine chemical are Jiangsu and Malaysia new factories. Jiangsu factory is to meet China new environmental regulations and to expand manufacturing capacity. It has been completed in May 2017. Malaysia factory is to serve South-East Asia market and lower tariff. It will be started in 2017H2 and be completed in 2018H1.

• The investment in carbon fiber composite was the factory that completed in April 2016.

• The investments in offshore wind power were phase I and infrastructure of Formosa I. Swancor plans not to make capital investment for Formosa II and III and will be pure developer.

Cash Cow Star Star

Why Swancor

Anti-corrosion resin is in line with environment protection demand, has high entry barrier, is an oligopolistic market.

Swancor has number 1 market share in China.

Wind turbine blade resin meets green energy demand, has high entry barrier, is an oligopolistic market. Swancor is top 3 in China.

Goldwind is the strategic partner.


Carbon fiber composite is keeping with energy saving demand. Swancor strengths are fine chemical expertise and wind turbine

customer base. Formosa plastic is the strategic partner.

Offshore wind power meets green energy demand, has high entry barrier. Swancor is a pioneer in Taiwan and has future project

pipeline. Macquarie Capital and DONG are strategic partners.

Thank you!

Disclaimer

This document may be deemed to contain forward-looking statements. These forward-looking statements include, among other things, statements regarding future events and the future financial performance of Swancor that involve risks and uncertainties. Readers are cautioned that these forward-looking statements are only predictions and may differ materially from actual future events or results.

Any projections in the document are based on limited internal and external


Any projections in the document are based on limited internal and external information currently available to Swancor, which is subject to change. Actual events or results could differ materially and no reader of this document should assume later that the information provided today is still valid. Such information speaks only as of the date of this document.

Readers shall rely on self-judgment to makes any investment decision. Readers shall not interpret the information in this document to be investment recommendations.

Documents

Swancor (TSE: 3708) Company Profile 2017/06completed in April 2016. Formosa Plastic (TSE: 1301) owns 18% of equity. • Products are pre-peg, thermal plastic plate, and extrusion spar